An influential group of MPs has weighed into the simmering row over the UK's carbon budgets, warning that the carbon reduction targets for 2022 and beyond will be missed, because of poor government policy on energy and the environment.

The environmental audit select committee said the current carbon targets represented the minimum cuts the UK could make to keep within international commitments. They said it was vital that the government should not attempt to water down its "carbon budgets", or the UK would fail internationally and lose the race to compete for green technologies, a rapidly growing sector of the international economy.

Joan Walley, chair of the environmental audit committee, said: "Emissions are currently not falling fast enough to prevent a dangerous destabilisation of the global climate in the coming decades – it would be incredibly short-sighted to slacken our carbon budgets now."

Last week, the committee on climate change wrote to Ed Davey to say that its preliminary assessment showed that the current fourth carbon budget, from 2023 to 2027, should be held to. The committee, set up under the climate change act to advise ministers on how to meet the climate targets, and the effects of policy on emissions, also said the government should make a decision on the fourth carbon budget as early as possible in the new year.

But many Tories want to ignore the committee and go for looser carbon targets. The row could take months to resolve, and is likely to prove unsettling for green investors and businesses, who want clarity on policy.

Nick Molho, head of climate policy at WWF-UK, said: "The review of the fourth carbon budget adds needless political risk to the enormous risks posed by climate change. All the evidence suggests that delaying action on reducing emissions is a false economy – it will cost more, and could result in the UK missing out on the significant growth opportunities of the low carbon economy."

He called on the prime minister, who intervened personally in 2011 to ensure the fourth carbon budget was accepted as coalition policy, to take a strong stance again. "The battle lines are being drawn in Whitehall, but this will come down to David Cameron's leadership. He championed the Climate Change Act in opposition as a legal framework that heeds the science and gives long-term certainty to businesses and investors. Just last week, he rightly highlighted the value of the green economy in his leader's speech at Conservative party conference. At the review, he should say unequivocally that the UK will stick to the course it has set."

The key reasons the 2022 targets would not be met were the failure to insulate houses and decarbonise transport and heat production, the EAC report found.

The report also found that arrangements for managing and reporting progress against carbon budgets have not been working properly. The MPs complained that the government's carbon plan, which set milestones for five key government departments to cut carbon, was out of date. Quarterly progress reports against milestones were not published as promised and current departmental business plans are not aligned with the plan.

Edward Davey, energy and climate secretary, said: "Our plan to meet ourcarbon budgets is credible and we're on track to meet the first three. Wewill consider the recommendations put forward by the EAC, and respondformally to the report in due course."

Walley said: "Ministers need to show much more vision now on how we can cut waste, improve our public transport and insulate more homes and businesses from rising fossil fuel costs. If we leave these changes for another 10 years it will become much more expensive to meet our climate change targets and we will be left behind by successful green countries like Germany."